Independent between the two World Wars, Lithuania was annexed by the USSR in 1940. On 11 March 1990, Lithuania became the first of the Soviet republics to declare its independence, but this proclamation was not generally recognized until September of 1991 (following the abortive coup in Moscow). The last Russian troops withdrew in 1993. Lithuania subsequently has restructured its economy for eventual integration into Western European institutions.
Update No: 272 - (29/08/03)
The Lithuanians are doing well, at least on the figures. GDP grew by 7.7% on an annual basis in the first half of the year. GDP rose by 9.4% in the first quarter and 6.1% in the second.
Growth of 6.1% is forecast for the year by the Lithuanian Finance Ministry. The IMF puts its forecast at 5.3% and the European Commission at 4.5%.
These forecasts agree in seeing strong growth in Lithuania, despite poor or zero growth in the wider European economy. The essentials are coming right at last after a delay in introducing reforms, that is compared with Estonia.
Not surprisingly Standard and Poor's (S&P) have upgraded their credit rating for Lithuania from stable to positive. Its long-term foreign currency debt rating is now put at BBB+, with short-term foreign currency debt rating at A-2 and long-term national currency debt rating at A-. S&P note that their review of the rating reflects expectations of rapid growth and small and stable debt.
New programme to 2006 and EU entry
The government has approved a new programme for economic development until 2006. Lithuania is expected to join the EU in spring 2004. The government expects growth to remain around 6% per annum for the coming period. This would allow government debt to be reduced from 25.6% of GDP to 24.4% by 2006, well below the threshold for joining Euroland. The programme is to be submitted to the EU Commission and other EU bodies. Clearly Lithuania is on track to join the EU, if it wants to. That is the rub.
It is not quite such a foregone conclusion that the population will support EU accession as outsiders might suppose, although still a strong probability. What happens to Poland when it joins next year will be keenly watched in Vilnius. Foreigners are apt to put Lithuania in with Estonia and Latvia as a Baltic state. That it is, but it recollects its long ties with Poland, a fellow Catholic country that was once joined to it in the Union of Lublin of 1569, an important event in the Counter-Reformation that saw both countries won back for Catholicism. It remains is just possible that either or both will be contrary once again, going against the current of history.
The Lithuanians have no common border with Russia, except the Russian enclave, Kaliningrad between themselves and Poland. The local Russians are only 11% of the population, much less than in the other Baltic States. Anti-Russian sentiment is not such a prime factor. Nevertheless becoming an EU member is still a way of asserting one's Western identity. That is why Lithuania is likely to join.
Vilnius confirms grid privatisation plan
The Lithuanian government confirmed a programme for the privatisation of electricity grids and decided to offer 71.35% of shares in Rytu Skirstomieji Tinklai (RST) and 77% of shares in Vakaru Skirstomieji Tinklai (VST) at a privatisation tender, the Baltic News Service reported.
According to the privatisation plan, the start price for the sale of the shares in RST amounts to 421.6m litas and VST - 358.9n litas. It was planned to announce the tender on July 21st and contenders should submit bids on September 14-15. The exact schedule for submitting bids to buy the shares will be announced in a privatisation bulletin.
It is planned to privatise Rytu Skirstomieji Tinklai and 77% shares in Bakaru Skirstomieji Tinklai by the end of this year, due to the fact that the privatisation schedule has been reduced from seven-eight months to four-five months.
The German company E.ON Energie, Finland's Fortum and the Lithuanian company NDX Energija plan to participate in the tender. Other companies have also expressed interest in the grids - the Lithuanian company, Achemos Grupe, Electricite de France and the Estonian company Eesti Energia. The state owns packets of 85.72% of shares in Rytu Skirstomieji Tinklai and Vakaru Skirstomieji Tinklai, of which 5% packets will be transferred as compensation to the owners of un-returned property. E.ON Energie owns 10.9% packets in both of the companies.
In a related development, Lithuania and Poland are to set up a joint venture with participation by the European Bank for Reconstruction and Development to implement a project to join the countries' power grids, Jonas Kazlauskas, deputy director of the Lithuanian Energy Agency said, BNS reported. He said that the agreement to set up a joint venture was reached at talks between representatives from the Lithuanian energy company Lietuvos Energija, Poland's Polskie Sieci Elektroenergetyczne (PSE) and the EBRD, in Vilnius recently.
The sides agreed to set up a joint working group to develop a business plan to set up the joint venture. It is expected that this business plan will be ready by the end of 2003. "We hope that when the business plan is ready, the European Commission's decision on financing for the project will be known. The future pace of the project will depend on this," Kazlauskas said.
Earlier Lithuanian Prime Minister, Algirdas Brazauskas and Polish Prime Minister, Leszek Miller, approached European Commissioner, Romano Prodi, with a request to support the project, at the end of June. Kazlauskas noted that research carried out by the EBRD shows that the energy bridge between Lithuania and Poland, which will cost 1.498bn litas, will be economically viable, if the European Commission provides aid of about 949.5m litas for the project.
It is planned to implement the project over five to seven years. The project involves constructing a power cable from Poland to Lithuania with a capacity of 1,000 megawatts, and as this will be used by Latvia and Estonia also, it will be necessary to modernise Latvian and Estonian electrical stations to that they can operate in the unified system, Kazlauskas explained.
He stressed that the project to join the grids is especially important to Lithuania due to the fact that at talks on joining the European Union the country promised to shut down the only nuclear power plant in Lithuania - Ignalina Nuclear Power Plant.
Ignalina currently produces over 70% of Lithuania's electricity. Lithuania hopes to join the European Union in spring 2004.
Mazeikiu Nafta back in the black
Unaudited net profit at the Lithuanian oil concern, Mazeikiu Nafta, to US GAAP in the first half amounted to 74.068m litas, compared with net losses of 135.7m litas in the same period last year, the company said in a press release, cited by Interfax News Agency.
Mazeikiu Nafta net profit to US GAAP in the first quarter of this year amounted to 115.8m litas. The company's audited loss to US GAAP, amounted to 114.3m litas in 2002. This year the company plans to increase sale by 20 per cent to 5.609bn litas and EBITDA is forecast to amount to 291.4m litas - 32.3 per cent more than last year (165.8m litas).
Mazeikiu Nafta includes the Butinges Nafta oil terminal, the Mazeikiu Oil Refinery, the only refinery in the Baltic states and the Naftotiekis oil pipeline. Yukos owns 53.7 per cent of the Mazeikiu Nafta shares and the Lithuanian government 40.66 per cent.
Russia's gas giant improves bid for stake in Lithuanian gas concern
Russia's Gazprom has now offered to buy a state-owned 34 per cent-stake in the Lithuanian gas utility, Lietuvos Dujos, for 100m litas [US$33,000], Lithuanian Prime Minister Algirdas Brazauskas said on national radio, Interfax News Agency has reported.
On 11 August, the Russian gas giant improved its original bid for the shares, which was 80m litas.
Brazauskas said the main reason for selling the shares was "to have constant, increased gas supplies at stable prices and to go on influencing how the gas is priced."
Brazauskas said that during the sale process, a separate agreement would cover the price of gas.
He also said that the shares could be signed over to Gazprom in the coming weeks. The prime minister said Lithuania would like 70 per cent of the gas consumed by the country to be supplied via Lietuvos Dujos.
The Lithuanian press reports that Gazprom has offered 91m litas and a bonus of 9m litas provided Lithuania does not regulate the price of gas delivered to major consumers.
Earlier reports said the government hoped to receive 116m litas, the same amount as Germany's E.ON Energie and Ruhrgas paid for an identical stake. Gazprom initially offered 80m litas, but the government wanted more.
Presently, the Lithuanian government controls 58.36 per cent in Lietuvos Dujos, and Germany's Ruhrgas and E.ON Energie holds a 35.49 per cent stake.
World Bank to allocate US$6.5m to Lithuania
The World Bank, the mayor of Vilnius and operator of the Vilnius heating company Vilniaus energija signed an agreement recently on a World Bank grant of US$6.5m for reorganisation of the municipal heating supply system in Vilnius, BNS reported. The funds will be allocated from the Global Environment Facility.
The project aims to reduce pollution in the city's residential areas. The central heating system is one of the main sources of pollution in the Lithuanian capital.
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